van de Ven, Wynands PMM, Konstantin Beck, Carine Van de

Risk Adjustment and Risk Selection in
Europe: six years later
van de Ven, Wynand P. M. M., Konstantin Beck, Carine Van de Voorde, Jürgen Wasem & Irith Zmora (2007).
available at: http://www.sciencedirect.com/science/article/pii/S0168851007000024
In this paper we analyse the developments concerning risk adjustment and risk selection in
Belgium, Germany, Israel, the Netherlands and Switzerland in the period 2000-2006. Since
2000 two major trends can be observed. On the one hand the risk adjustment systems have
been improved, for example, by adding relevant health-based risk adjusters. On the other
hand in all 5 countries there is evidence of increasing risk selection which increasingly
becomes a problem, in particular in Germany and Switzerland. Some potential explanations
are given for these seemingly contradictory observations.
Since the mid-1990s citizens in these countries can regularly switch sickness fund, which
should stimulate the sickness funds to improve efficiency in health care production and to
respond to consumers’ preferences. When looking at managed care there are some weak
signals of increasing managed care activities by individual sickness funds in all countries
(except Belgium). However, with imperfect risk adjustment, such as in Israel and Switzerland,
insurers will integrate their managed care activities with their selection activities, which may
have adverse effects for society, even if all insurers are equally successful in selection.
The conclusion is that good risk adjustment is an essential pre-condition for reaping the
benefits of a competitive health insurance market. Without good risk adjustment the
disadvantages of a competitive insurance market may outweigh its advantages.